GAZA CITY (Reuters) -- Israeli gunboats and an Egyptian clampdown on fuel smuggling into the Gaza Strip are strangling the enclave's little fishing fleet, slowly turning a generation of fishermen into fishmongers.

Since 2009, they have been unable to sail out beyond three miles because of Israel's strictly enforced blockade. This year they can hardly afford to go out at all because diesel has nearly tripled in price.

There are about 3,700 full-time fishermen in the Gaza Strip ready to serve a market of 1.7 million Palestinians. They used to export to Israel. Now Gaza imports about 80 percent of its needs from the Egyptians and the Israelis.

"Once we made enough to let us give away fish to the poor and needy people. These days we are begging for aid," said Mahmoud al-Assi, 66, a fisherman most of his life and currently the chairman of Gaza's non-profit Fishermens' Society, which supports boat owners with tools, ice and fuel.

"Just like the fish, we will die if we're out of the water for too long," said Al-Assi.

Fresh fish from the Mediterranean, grilled or fried, is Gaza's favorite dish. Grouper, bream, bass and snapper are prized. But this year the fleet even missed the usually plentiful season of cheap sardines.

Driving along the coast road by Gaza City you cannot miss the fish market -- a covered corridor hosting 12 shops, decorated with images of various kinds of fish. The smell of the fresh catch of shrimp and crab blows ashore on the sea breeze.

Two boys with their father are fascinated by the brightly glistening lizard and blue fish.

"Is this grouper?" asks the man, in surprise. Gazans call grouper the "Royal Meal" but these days it is rare.

"As you see, the waters gave us only two grouper today," says fishmonger Abu Hasseera, displaying a 10-kg fish whose price has rocketed to 80 shekels ($21) a kilo from 50 shekels ($13) a few months ago.

"The sardines are so near yet so far," he says. "We see the spot but we cannot reach it because of the fishing limit.'

Ranged in boxes on a donkey cart, Egyptian-imported sardine sells for $1.2 a kilo. On the few occasions when locally caught sardines were available this season, the price was $6.5 a kilo, unaffordable to most families.

"It has affected our income. I am losing 60 percent of the profits I used to make in past seasons," Abu Hasseera says.

Gaza has been under Israeli blockade since Hamas forces took control in 2007, ousting the rival Fatah forces of President Mahmoud Abbas. Israel says it must maintain the blockade to prevent arms and military material reaching Hamas.

An interim Palestinian-Israeli peace accord allows fishermen to sail out for up to 12 miles (19 km) out from the coast. But since Hamas took over Gaza, Israeli naval boats have gradually limited the distance to three miles.

No boats at all dared put to sea when Israel invaded Gaza in December 2008 in a devastating three-week assault.

The fuel crisis began this February, when Gaza's neighbor Egypt cracked down on industrial-scale fuel smuggling via an under-the-border warren of tunnels that supplies Gazans with everything from cars to cattle.

The smuggling was diverting government-subsidized fuel from Egyptians in Sinai. Hamas rubbed salt in the wound by taxing it.

The price of diesel on the Gaza black market is now about triple what it was a few months ago. Some gasoline and diesel, as well as cooking gas, is being imported from Israel for the private sector, but Israeli diesel and petrol prices are considered prohibitive for commercial users.

Fishing is not the only Gaza industry hurt by the fuel price crisis and Israeli restrictions.

The steep rise in prices jacked up the cost of running irrigation pumps in the growing season, slicing Palestinian farm income in what could have been a good season.

Carnation farmers relying on truck transport had to leave many flowers in refrigerators, with no electricity to keep them fresh. About 2.5 million wilted flowers were sold off cheap.

Gaza exported two million blooms fewer than the 11 million sold in 2011, the international charity Oxfam says, compared with an average of 50 million carnations every year before the blockade was imposed in 2007.

Bumper crops of sweet peppers and cherry tomatoes, by contrast, escaped the worst of the fuel crisis, and exports permitted by Israel soared from 6 and 7 tonnes respectively last year to 44 and 75 tonnes this year, proving Gaza has a viable agricultural industry.

Gunboats

Fishermen say the Hamas administration provides them with fuel once a week, forcing them to search for the rest of their requirements on the black market at a rate many cannot afford.

So some days they sit tight on the sand, drinking tea and blowing the smoke of their cigarettes into the wind.

Assi estimated annual losses of fishermen at $11 million.

The industry's daily wage has dropped from 300 shekels ($78) to just 20 shekels ($5), he says.

"I have been a fishermen since I was 17 years old. This is the worst ever fishing season," said Mohammed Abu al-Sadeq, 66, as he tied up his boat after a night of fishing that brought only a meager catch.

"When there is no cheap fuel we do not go to sea," said Sadeq's brother, Khamees. "It is a tragic season."

Jihad Salah at the Fish Resource department of the Hamas-run agriculture ministry acknowledged conditions were grave, but blamed Israel.

He admitted that the fuel ration was not enough for a fisherman's working day but said it was all they could afford "to at least help some fishermen earn a living".

"Fishing as a profession is in danger. The (Israeli) occupation is pushing hard to turn fishermen into merchants who leave the job and instead buy fish from Egypt and from them."

Israel evacuated its settlements in Gaza in 2005. But critics say its blockade has turned the enclave into an open prison, its economy strangled by import and export restrictions and many of its people depending for staples on UN food aid.

This month, Sadeq and other fishermen were intercepted by an Israeli navy gunboat within the permitted zone and warned by a sailor with a megaphone to stay within the limits.

Israeli naval forces took action against Gaza boats seven times in the past three months, including firing warning shots and confiscating boats, said Salah.

"Only yesterday we got back eight small fishing boats that had been confiscated over the past two years. They came back with no gear or engines," Salah said.

Fishermen can lose their boats if the Israeli navy finds them with motors whose capacity exceeds 25 horsepower.

So Gaza depends mostly on fish smuggled from Egypt through the network of border tunnels. The fish sometimes decay if Egyptian security is restricting movements. Al-Assi reckons the local fleet now supplies no more than a fifth of the market.

"We used to send eight truckloads to Israel a day. Nowadays Israel closes our sea and exports its fish to us," he said.

Ali al-Habeel, a 52-year-old fisherman, said the fuel crisis has also stopped Gazans sailing towards Egyptian waters to buy the fish at sea off Egyptian boats.

The Gaza government does not try to stop the smuggling of fish via tunnels. Representatives of its agriculture ministry vet the merchandise to ensure it is fit for consumption.

But customers prefer it fresh, said Abu Hasseera, whose family owns a restaurant at Gaza's beach-front.

"We try hard to make our own catch from the Gaza sea to satisfy our customers, and we tell them when it is not our catch," he said. "Egyptian fish is good and varied, but you have to make sure it is fresh."